Historically, officials from 23 northeastern colleges with selective admissions policies and high tuition met each spring to compare financial aid packages for more than 10,000 common applicants. The meetings, known as “Overlap”, were designed to eliminate any differences in the financial aid packages offered by the various colleges. What would you predict would be the effect on net price (tuition less financial aid) paid by the applicants to the colleges participating in the Overlap meetings? Are there any factors that would work to undermine the ongoing viability of the Overlap practice? If so, what might these factors be?

Question

Historically, officials from 23 northeastern colleges with selective admissions policies and high tuition met each spring to compare financial aid packages for more than 10,000 common applicants. The meetings, known as “Overlap”, were designed to eliminate any differences in the financial aid packages offered by the various colleges. What would you predict would be the effect on net price (tuition less financial aid) paid by the applicants to the colleges participating in the Overlap meetings? Are there any factors that would work to undermine the ongoing viability of the Overlap practice? If so, what might these factors be?

Answer 1

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Answer 2

Based on the information provided, the effect on net price paid by the applicants to the colleges participating in the Overlap meetings would likely be a reduction or elimination of differences in financial aid packages. The goal of the meetings was to ensure that the colleges' financial aid packages were similar for the common applicants. This means that the net price paid by the applicants would likely be more consistent across the colleges.

However, there are factors that could potentially undermine the ongoing viability of the Overlap practice. Some of these factors could include:

1. Changes in financial circumstances: The financial situations of the participating colleges could change, leading to variations in their ability to offer financial aid. If a college faces financial difficulties, it may reduce the aid it can offer, which could disrupt the financial aid consistency established through the Overlap practice.

2. Competition for students: Colleges are often in competition with each other to attract top students. If colleges feel that they need to differentiate themselves to attract a certain caliber of students, they may deviate from the Overlap practice and offer more generous financial aid packages. This could lead to disparities in net prices paid by applicants.

3. Increasing demand for financial aid: As the cost of tuition continues to rise and more students require financial aid, colleges may face increased pressure to allocate limited aid resources. This could make it difficult to maintain consistent financial aid packages among multiple colleges.

4. Legal concerns: Antitrust laws may come into play if officials from multiple colleges collude to fix financial aid packages. If the Overlap practice is viewed as an antitrust violation, it could face legal challenges.

It's important to note that these are potential factors that could undermine the viability of the Overlap practice. The actual impact would depend on various circumstances and the decisions made by the colleges involved.